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How Tax Reform Could Grow our Economy and Create Jobs

September 19th, 2017

Over 150 countries in the world have shifted a significant portion of their tax mix to border adjustable consumption taxes – value added taxes (VATs) or goods and services taxes (GSTs). Consumption taxes are “border adjustable taxes” and allowed under World Trade Organization rules. Consumption taxes are a tax on consumption – as opposed to income, wealth, property, or wages. Consumption taxes are called goods and services taxes in Canada, Australia, New Zealand or value added taxes in other countries. They are usually a tax only on the incremental value that is added at each level of the supply chain to a product, material or service. Most countries VATs or GSTs are tariff and subsidy replacements, mimicking a currency devaluation if a country raises the VAT or GST and uses proceeds to lower purely domestic taxes and costs.

After 40 years of multilateral tariff reduction, other countries replaced tariffs with VATs but the U.S. did not. American exporters face nearly the same border taxes (tariffs + consumption tax) as they did in the early 1970s. Foreign VATs are export subsidies as they are rebated to companies that export their goods. For example:

Mexico established a 15% VAT after NAFTA
Central American countries established a 12% VAT after CAFTA
Germany raised its VAT to 19% in 2007 to fund business tax reduction for trade competitiveness

The rates range from 12% to 24% and average 17% globally. This means that virtually all foreign countries tax our exports at 17% on top of tariffs. They subsidize domestic shipments abroad with the average 17% tax rebate. The figure below illustrates how it works.

U.S. Local Price = $100

China Local Price = $100

U.S. Price PLUS 17% VAT = $117.00

Chinese Price MINUS 17% VAT rebate = $85.47

The map below shows which nations have consumption taxes (red) and which do not (blue).

Because foreign consumption taxes are border adjustable, companies that export are double taxed. They pay U. S. taxes and the foreign border tax. Importers can sell cheaper products because they receive a consumption tax rebate from their home country and do not pay U. S. VAT.

Eliminate Payroll Tax Burden with the most efficient VAT in world

In written testimony to the House Ways and Means Committee of the U. S. House of Representatives on May 18, 2017, the Coalition for a Prosperous America (CPA) recommended “a new border adjustable consumption tax (Goods and Services Tax) that funds a full credit against all payroll taxes.”

Highlights from the testimony paraphrased or quoted include: “A new U.S. goods and services tax (GST) of approximately 12% should be enacted to shift taxation to consumption using the credit/invoice method. The proceeds should be credited against payroll taxes paid by all workers and businesses. GST proceeds should be applied as a full credit against the 15.3% rate of payroll taxes to reduce the cost of labor in the US while increasing after tax wages.

Exported goods and services would receive a full rebate. Imports would pay the GST. Small business with less than, for example, one million dollars could be exempted without sacrificing significant tax revenue.”

CPA’s written testimony explained, “Domestic prices vs. wages would not worsen because the payroll tax is embedded in the cost of all goods and services. Thus, eliminating the payroll tax lowers the prices for goods and services or increases wages depending upon the particular competitive forces in each product sector. A GST raises goods and services prices, but the GST/payroll tax combination would largely cancel each other out thereby holding the domestic economy harmless.

The more modern GSTs implemented by free market economies are in Canada, Australia and New Zealand. The compliance and administration burdens are relatively low in comparison to other taxation methods. The U. S. can learn from those and other countries’ experiences to implement the most modern, streamlined GST in the world.”

In summary, the proposed GST would

Reduce the cost of labor in the U. S.
Give every worker a raise
Lower price of U/ S. exports
Levy a tax on imports

The following are some of the benefits of a payroll tax credit for manufacturers, ranchers, and farmers:

Regressiveness of VAT offset by elimination of regressive payroll tax
VAT costs on all domestic producers are offset
No impact on prices of domestic goods/services
Imported goods/services prices increase
Cost of production for exports reduced

Change to a Sales Factor Apportionment (SFA) Border Adjustable Profit Tax

Last year, I wrote an article about corporate tax reform at the federal level based on the Sales Factor Apportionment Framework proposed by one of the members of the Coalition for a Prosperous America, Bill Parks. Mr. Parks is a retired finance professor and founder of NRS Inc., an Idaho-based paddle sports accessory maker. He asserted that “Tax reform proposals won’t fix our broken corporate system… [because] they fail to fix the unfairness of domestic companies paying more tax than multinational enterprises in identical circumstances.”

He explained that multinational enterprises (MNEs) can use cost accounting practices to transfer costs and profits within the company to achieve different goals. “Currently MNEs manipulate loopholes in our tax system to avoid paying U. S. taxes… MNEs can legitimately choose a cost that reduces or increases the profits of its subsidiaries in different countries. Because the United States is a relatively high-tax country, MNEs will choose the costs that minimize profits in the United States and maximize them in what are usually lower-tax countries.”

The way his plan would work is that the amount of corporate taxes that a multinational company would pay “would be determined solely on the percent of that company’s world-wide sales made to U. S. customers. Foreign MNEs would also be taxed the same way on their U. S. income leveling the playing field between domestic firms and foreign and domestic MNEs.”.

The Board of the Directors of the Coalition for a Prosperous America chose to support Sales Factor Tax Apportionment and included the following in their testimony to the House Ways and Means Committee:

“The US corporate tax system harms America’s trade competitiveness, overtaxes income from wages, under taxes consumption, and is bad at actually collecting what is owed. It also enables rampant base erosion through transferring profits to tax havens or countries with lower corporate tax rates. Full reform centered around destination based, border adjustment principles can result in an efficient, trade competitive, and largely tamper-proof tax system.

SFA is a destination based profit tax. Pretax income is allocated to the US in proportion to the percentage of a company’s total sales in the U. S. Pre-tax income earned outside the US is not taxed. Tax rates can be lowered substantially while still meeting revenue targets.”

The Coalition for a Prosperous America favors “a border adjustable business tax (for all entity types) which allocates pre-tax income based upon the destination of sales. Formulary apportionment based upon a single sales factor (sales factor apportionment or SFA) is well established at the state level. It solves most of the base erosion/profit shifting and tax haven abuse problems facing tax writing committees. SFA eliminates the disparate tax treatment between domestic companies (who pay the full income tax burden on worldwide income), multinationals (many of which shift profits to tax havens), and foreign companies (which pay a territorial income tax).

A broad based 12% GST could raise $1.4 trillion in new revenue. Payroll tax revenue in 2015 was 33% of total tax revenue at $1.056 trillion.”

CPA asserts that U. S. “trade competitiveness would be substantially improved because exports are freed from both the GST and payroll tax burden. Imports never include the cost of the U. S. payroll tax, but would pay the GST. This effect has been called Fiscal Devaluation because it mimics a currency devaluation for trade purposes. It only works if you combine a new GST with a ubiquitous domestic tax or cost reduction. The optimal domestic tax reduction is the payroll tax burden.”

The reason for CPA’s support is that “SFA taxes pre-tax income allocated to the U. S. but not profits allocated to foreign sales. Domestic firms can legitimately ‘avoid’ taxation by exporting more. Profits from imports are subject to tax. Domestic, multinational and foreign firms are on an equal tax footing.

The current corporate tax system cannot be fixed because it allows the fiction of intra-firm transactions to erode the tax base. Multinational companies use them to self-deal, strictly for tax purposes, shifting income to tax haven jurisdictions. Companies sell products or services to themselves, governed only by an ‘arm’s length’ principle which allows them to create their own pricing terms subject to a nearly unenforceable ‘fair market value’ constraint.

The intra-company transactions are not free market, ‘arm’s length’ or true third-party transactions. The only economically meaningful ‘sale’ is one to a true third party outside the company. As much of 30% of tax revenue may be lost from profit shifting to tax haven jurisdictions which have effective tax rates of 0-4%. These include Bermuda, Netherlands, UK Caribbean Islands, Ireland, Luxembourg, Singapore, and Switzerland.”

The CPA testimony provides the following example: “Assume a multinational corporation has worldwide sales of $100 billion, $50 billion sales in the U. S. and company-wide pretax income of $10 billion. Fifty percent of the profits, under SFA, are apportioned to the US. So, the profits to be taxed in the USA in this case are $5 Billion. Using a 20% corporate tax rate yields a SFA tax of $1 billion. Intra-company transactions with a Bermuda subsidiary would be irrelevant.

Merely lowering the U. S. corporate tax rate for example to 15% without further reform would not eliminate the tax competition with tax haven jurisdictions. SFA would make tax havens irrelevant because true sales to any foreign country would be ignored. IRS litigation centered around the proper fair market value of intra-firm transactions would disappear. Only profits allocated to the US in proportion to true third-party sales would be taxable.”

CPA asserts that “SFA would allow a significant reduction in the business tax rate while collecting similar revenue because base erosion is largely fixed. By one estimate, a 13% corporate tax rate under SFA would collect the same revenue as the current system…”

In conclusion, CPA recommends, “The U. S. tax system should shift to more border adjustability through destination based taxation. If the House GOP Blueprint does not gain Senate or White House support, the Ways and Means Committee has solid alternatives to meet their goals. CPA supports enacting (1) a new GST to fund a full credit against payroll taxes, plus (2) a shift to sales factor apportionment of global profits as an alternative to our current corporate income tax system.”

We need to take bold action if we want to rebuild our manufacturing industry to create jobs and prosperity. As I visit district offices of our California Congressional delegation as chair of the California chapter of CPA, I am encouraged by the interest these recommendations for tax reform are generating on a bi-partisan basis.

Tags: Payroll Taxes, Sales Factor Tax Apportionment
Posted in Economy, General, Taxes/Regulations | No Comments »

How to Fix the Dollar’s Overvaluation & Exchange Rate Misalignment

September 9th, 2017

On July 11, 2017, the Coalition for a Prosperous America released a paper titled, “The Threat of U.S. Dollar Overvaluation: How to Calculate True Exchange Rate Misalignment & How to Fix It” by Michael Stumo (CEO), Jeff Ferry (Research Director) and Dr. John R. Hansen, a 30-year veteran of the World Bank and Advisory Board member.

The purpose of the paper is to explain the problem of the dollar overvaluation, to show how to accurately calculate the dollar’s misalignment against trading partner currencies, and to propose a solution this serious threat to America’s future.

The authors point out that “In past centuries, the only reason that people would choose to hold a foreign currency would be to trade with it… But in the last few decades, and especially since the early 1990s, international speculators and traders have invested in dollars, including stocks, bonds, and cash, at the rate of hundreds of billions of dollars a year. The dollar investments of private investors now far outweigh the investments of government investors.”

These private investments shrunk from $1 trillion in 2007 down to $200 billion in 2010 during the recession and have grown back up to about $400 billion.

The authors explain that private investors buy dollars for many reasons: to purchase goods that are priced in dollars (like oil), “as a hedge against depreciation of their own local currencies,” to invest in the U.S. economy, to make a speculative investment, and “in many cases simply because in an uncertain world, the U.S. dollar is viewed as a rock of reliability and stability.”

In economic terms, the authors explain that the current account deficit is “the trade deficit with overseas remittances and other small items added in.” In the past when currency markets still maintained a link between exchange rates and balanced trade, the value of the dollar and the account deficit affect each other; i.e., “When the dollar rises, the current account worsens (larger negative figure as a percent of GDP), and when the dollar falls, the current account improves.”

However, the authors point out this hasn’t been happening for years. For example, “The current account deficit has been strongly negative throughout the last ten years, yet the dollar has not fallen to bring trade back into balance. On the contrary, in mid-2014, despite a trade balance close to -3% of GDP, the dollar suddenly rose more than 15%, and stabilized in 2016, only to rise yet again after the November election.”

They add, “These exchange rate increases are likely to worsen the trade deficit in the next two to four years. The ability of the U.S. dollar to defy gravity despite huge and persistent trade deficits has played an important role in the persistence of those deficits.”

The consequences are: “A dollar that is too high keeps our exports too expensive and makes imports too cheap, prompting Americans to consume more imports and to export less. The impact of an overvalued dollar is hard to overstate.”

Why this is critical is that, “According to Fred Bergsten and William Cline, both of the Peterson Institute, “every 10 percent rise in the dollar adds about $350 billion to the trade deficit and reduces the level of U.S. economic activity by about 1.65%, with a corresponding loss of about 1.5 million jobs.” Since the U.S. has had a more than $500 billion trade deficit since 2003, except for 2009, this helps explain why we lost 5.8 million manufacturing jobs between 2000 – 2010.

Calculating the Currency Misalignment

In 2008, Fred Bergsten and his Peterson Institute for International Economics colleagues developed a methodology to calculate a Fundamental Equilibrium Exchange Rate (FEER) of a currency that will enable a country’s trade to balance (i.e. exports and imports equal) in a reasonably short timeframe. The authors state, “The traditional FEER methodology generally targets getting a nation’s current account to within plus or minus 3 percent of balance…In 2015, Peterson suggested targeting absolute, true-zero trade balances and recalculated FEER levels based on targets of balanced trade. Moving from a target of +/-3% of GDP to a true-zero balance is very important for the United States. Our present current account deficits equal to 3% of GDP cost us the needless unemployment of about three million American workers, according to most estimates of the job cost of imports.”

After “the Peterson Institute issued new global FEER estimates in May using the traditional +/- 3% balance target methodology,” Dr. John Hansen “converted these FEER estimates into true-zero FEER estimates using a methodology agreed with Peterson.”

According to his calculations, “The U.S. dollar is currently 25.5% overvalued compared to its FEER,” which makes it “more seriously misaligned than the currency of any other major trading partner country. “

In contrast, “Germany and Japan – are misaligned in the opposite direction. They are undervalued while the U.S. dollar is overvalued.” Japan’s currency is undervalued by 25% and Germany’s by 23.6%.

What was surprising to me was that according to Dr. Hansen’s FEER calculations, China only had a 4.7% undervaluation. For the last ten years, I have read article after article about China’s undervaluation of their currency, estimated to be anywhere from 25% – 40%. I didn’t realize this had changed until I searched and found an article from November 18, 2016 by Fred Bergsten of the Peterson Institute, in which he wrote, “China was the champion currency manipulator of all time from 2003 through 2014. During this “decade of manipulation,” China bought more than $300 billion annually to resist upward movement of its currency by artificially keeping the exchange rate of the dollar strong and the renminbi’s exchange rate weak. China’s competitive position was thus strengthened by as much as 30 to 40 percent at the peak of the intervention. Currency manipulation explained most of China’s large trade surpluses, which reached a staggering 10 percent of its entire GDP in 2007.”

According to Bergstrom, China is no longer undervaluing their currency because they have “experienced large outflows of private capital that have driven its exchange rate down and indeed sparked market fears of disorderly renminbi devaluations. To their credit, the Chinese have intervened heavily on the opposite side of the market: Instead of buying dollars to keep the renminbi weak, they have sold large amounts of dollars to prevent it from sliding further.”

As a consequence of the misalignment of the dollar against the currency of two of our major trading partners and to a lesser degree with other countries, “The dollar’s gross overvaluation imposes a tax on the selling price of all U.S. products that can be traded internationally – even if they are not actually traded. It is a tax on U.S. producers trying to export. On U.S. producers competing with imported goods. And it is even a tax on U.S. producers who face the threat of imports. For example, the threat of imported shirts from China can force a New England shirt manufacturer to sell his shirt for 25 percent less than he would otherwise be able to charge if the dollar were not so overvalued.”

Because this tax is a tax on the selling price and not on profits like the income tax, “…the dollar’s overvaluation is such a serious threat to the survival of manufacturing and farming in the United States. The dollar’s overvaluation threatens not only the existence of these two critical sectors. It also threatens the entire economy because these two sectors are by far the most important sources of the exports we need to pay for our imports.”

Contrary to popular opinion, the overvaluation of the dollar is not caused by government currency manipulation The authors assert that “The dollar’s misalignment is primarily caused by the buying and selling decisions of private traders…the dollar is overvalued because private investor decisions are unrelated to the fundamental performance of trade or production in the U.S. or any other economy, and the global monetary system no longer has a mechanism to bring exchange rates back to levels consistent with balanced trade.”

What is the solution?

Dr. John Hansen has developed a Market Access Charge (MAC) “as a system to discourage overseas private investors and return-sensitive official investors such as sovereign wealth fund managers from excessive speculation and trading in U.S. dollar assets.” (For further details, go to his website.)

He believes that “By reducing the incentive for foreigners to invest in dollars, we can gradually and safely reduce its overvaluation, benefiting the U.S. economy and restoring control over our own currency.”

His proposal is to initiate the MAC with a 0.5% charge “on any purchase of U.S. dollar financial assets by a foreign entity or individual…As a one-time charge, the MAC will discourage would-be short-term investors, many of whom hold dollars or dollar-denominated securities overnight or even for minutes for the sake of a tiny profit.

The MAC rate would operate on a sliding scale, geared to the value of the trade deficit as a percentage of GDP. The MAC tax would rise if the trade deficit rose, and fall as the trade deficit falls… Most importantly, the MAC would have a substantial impact on the dollar’s value, moving it gradually and safely to a trade-balancing exchange rate and keeping it there, regardless of what other countries do. If the trade deficit goes to zero, so would the MAC.”

Dr. Hansen and the Coalition for a Prosperous America believe that this small charge “would be sufficient to discourage foreign inflows of hot money, with no material impact on foreign direct investment in factories and other directly productive activities.”

They agree that, “if properly implemented, the MAC could eliminate the full 25% overvaluation of the dollar, and this could lead to the complete elimination of the trade deficit over the subsequent three to four years.”

How could it be implemented?

The authors believe the MAC could be implemented unilaterally by the U.S. federal government. because “it does not violate IMF rules, which explicitly allow member nations to implement policies needed to rectify international financial imbalances [and] It does not violate WTO rules either.”

However, they “recommend a period of international consultation with G20 members to reduce the risk of misunderstandings and, hopefully, to get them to implement their own versions of the MAC…[which] would benefit the U.S. and the world by restoring a stable foundation for balanced, sustainable global growth.”

They envision that, “The MAC would be a self-financing system since it would generate revenue. We expect the MAC would generate at least $1 billion in annual revenues, and probably more, depending largely upon how much foreign exchange trading in the dollar declines due to increased transaction costs from the MAC.

Because the goal of the MAC is “to reduce and ultimately eliminate the trade deficit,” the revenue would be temporary and would go to zero when the goal is achieved. They propose that at “MAC revenue be earmarked for a “U.S. Competitiveness Fund” supporting short-term spending projects such as infrastructure investment.”

They also clarify that “no Americans would pay the MAC charge. Only foreign-based individuals and entities are liable to pay the MAC.” Until the MAC achieves its goal, the Government will enjoy increased tax revenue because the MAC will greatly stimulate U.S. competitiveness and thus overall output, profits, wages – and thus the tax base.”

They “believe the MAC could eliminate the trade deficit entirely over a period of several years,” but emphasize that “there is still a clear need for other U.S. trade policies focused on eliminating unfair trade practices and non-tariff barriers. The MAC should be seen as complementary to, not competitive with, such trade policies. Though in remission now, currency intervention and manipulation by governments is likely to resume, and the U.S. government should not hesitate to act to stop or counteract such activities.”

The Coalition for a Prosperous America “favors actions to strengthen the monitoring, definition, and enforcement of remedies to counteract currency manipulation, dumping, and other unfair trading practices.” I strongly agree with their recommendation to implement a Market Access Charge to reduce dollar overvaluation, discourage unwanted investment in the dollar, bring down the dollar’s value, significantly reduce America’s trade deficit and stimulate economic growth, employment and personal income.

Tags: account deficit, currency manipulaton, trade deficit
Posted in Currency Misalignment/Munipulation, Economy | No Comments »

Do Low American Savings Rate Cause Trade Deficits?

September 2nd, 2017

Mainstream trade news continues to assert that trade deficits don’t matter. Economists help reporters write these fake news stories by claiming that America’s failure to save money is the problems, not foreign trade cheating. On June 20, 2017, the Coalition for a Prosperous America released a research paper titled “Do Savings Rates Cause Trade Deficits? by Michael Stumo (CEO) and Jeff Ferry (Research Director) that shows why globalist economists are wrong about what causes trade deficits, offshoring and job losses.

They write, “A popular, but misleading, claim is that low US savings, relative to investment, causes our trade deficit. For example, Harvard professor and former Reagan administration advisor Martin Feldstein.has said that the US fiscal deficit, which indeed reduces national savings, is the cause of the trade deficit. ‘If a country consumes more than it produces [thus saving little], it must import more than it exports.’”

These macroeconomists “claim that Americans spend too much, save too little, produce too little, and thus must import to support their gluttony.” They are incorrect.

White House economists use the “savings rate causes trade deficits” claim to create the false illusion that nothing can be done. But the real problem is that a few foreign countries – like China, Japan, Germany and South Korea – have economic strategies to overproduce, under consume and ship their overcapacity to the US. Their growth strategy is their full employment program. They export their unemployment to the US.

DISTINGUISHING CAUSES FROM MATHEMATICAL INTERRELATIONSHIPS

To macroeconomists, the ”National savings, investment and net trade are variables within equations or formulas known as ‘national income identities’. Because the variables are within the identity, they are called “endogenous’ and are explained by the equation.” But they do not explain what causes the changes.

“The basic Gross Domestic Product equation is referred to as a national income identity, expressed in the following equation:

GDP = C + I + G + NE

C = Consumption; I = Investment, G = Government and NE = Net Exports. Net Exports are also expressed as X – M in another version of this equation. When the Net Exports is a negative figure as it has been since 1979, this reduces the GDP. According to previous research by the Coalition for a Prosperous America, “the annual trade deficit has reduced each year’s GDP by some 3% to 5.5% each year, and those reductions compound over time.”

The purpose of the paper is to explain “how to distinguish (a) causation from (b) mathematical interrelationships in the national income identity or equation that underlies this debate. For reasons explained below, real world changes (exogenous factors) outside the identity are the true causes. These real-world changes directly impact one or more variables within the identity, transmitting through the equation by mathematical necessity. In short, national savings is related to the trade deficit in an accounting sense but does not cause it.”

Government policies often affect each one of the variables of the above equation. For example, the income tax rate may affect Consumption. If rates are high, then American consumers have less money to devote to consumption. If Government consumption and expenditures through procurement is down as it was under Sequestration, then companies that sell to the government make less money and have less money to buy products as business and corporate consumers.

To clarify the relationship between savings and trade deficits, the authors cite Robert Scott of the Economic Policy Institute: “Accounting identities do not, and cannot, explain the causal relationships between savings, investment, and trade flows. Do low savings rates cause trade deficits, or does causation run in the other direction? A trade deficit reduces the incomes of domestic workers, pushing many into lower income brackets. Families with lower incomes generally find it much harder to save. Therefore, increasing trade deficits can and do reduce national savings.”

DEBUNKING THE MORALITY VS SAVINGS RATE HYPOTHESIS

International economists in important positions “implicitly argue that no policy action is necessary or effective because US citizens simply do not save enough. We have caused our own problem. Our immoral, gotta-spend-it-now culture must become more austere.”

However, the authors explain that “National savings, in the context of the national income identity, is the aggregate of household, business and government savings. It is the extent to which national income exceeds private and public spending.

Household savings can, for example, go down if family earnings fall but they spend the same as before on necessities. Taxes or interest rates could go up causing consumers to spend less. Neither cause has anything to do with financial morality.”

Instead, government policies can and do affect savings rates. The authors state, “Surplus countries such as Germany and China have been deficit countries in the past… with low savings rates and trade deficits. Their cultural propensity to spend or save did not miraculously change…policy changes in the 1990’s and 2000’s caused transfers of wealth from households to industry forcing less consumption and more production at increased scale and with very competitive prices. The result was more national savings and trade surpluses.”

HOW OVERSUPPLY IS TRANSFERRED TO DEFICIT COUNTRIES

The authors show how the oversupply (overproduction) of some countries is transferred to other countries causing them to become deficit countries. They write; “All countries cannot run trade surpluses. Offsetting deficits must exist elsewhere. The primary reason for a country to engineer persistent surpluses is to spur domestic employment by excessive reliance upon foreign consumers. The deficit country, however, experiences devaluation of its formerly well employed labor.”

They point out that in 2005, “then-Federal Reserve Board chairman Ben Bernanke argued that the large and growing U.S. current account deficit is caused not by anything happening in the U.S., but by decisions taken by emerging economy nations to run very high savings rates, pursue export-led growth, and lend money to other countries, especially the U.S. He called the situation a ‘global savings glut.’ These excessive inflows of foreign savings raise the U.S. dollar exchange rate, drive down our interest rates, and force our economy into a trade deficit.”

The method by which this transfer takes place is described by Professor Michael Pettis, quoted in the paper:

“If any country takes steps to change the gap between its total domestic savings and its total domestic investment, then those steps must also affect its trade balance. Because a change in one country’s trade balance must be matched with an opposite change in the trade balance of all other countries, there must also be an opposite and equal change in the gap between the total domestic savings of the rest of the world and the total domestic investment of the rest of the world.”

Other factors affecting this transfer are “wage suppression (intentionally as in Germany) or because high volumes of new workers are entering the labor market (as in Asia) and redirect household resources to investment. The result is that productivity increases faster than wages. Increased production outstrips the ability of domestic households to consume. Domestic supply exceeds demand and the country must rely upon foreign consumers to soak up the excess.”

What Tactics Do Surplus Countries Use?

The authors explain that “Export-oriented or investment-oriented countries can utilize policies to reduce consumption, increase production and export at very competitive prices.”

China:

Wage growth is constrained to well below the growth in worker productivity
Undervalued exchange rate…for much of the past two decades
Government subsidizes Chinese manufacturing exporters
Financial repression of Chinese households
Vast amounts of surplus labor that produces more than it consumes.

In essence, the authors state “They export oversupply, deflation and unemployment. The result is excessive reliance on demand from consumers in deficit countries.”

Germany

Holds down domestic wages
German banks provide direct loans and vendor financing to foreign countries to buy German products
Impose a 19% consumption tax (VAT) that is rebated to exporters

As a result, “The economic distress caused by the German-policy-induced crisis in other eurozone countries perversely holds down the value of the euro” making Germany’s exports more price competitive in the global marketplace.

SOLUTIONS TO REBALANCE TRADE AND CAPITAL FLOWS

The authors present the following recommended solutions to reduce trade deficits:

Fix currency misalignment, especially the overvalued dollar.
Implement a US consumption tax, such as a goods and services tax (GST), in a revenue neutral and distribution neutral way by completely offsetting the payroll tax burden.
Adopt a territorial business income tax called sales factor apportionment (SFA)
Consider broadly applied tariffs to counter the unearned advantages of trade surplus countries
Apply selective tariffs to high value or strategic products that the US wants to produce

In conclusion, the authors state: “…the level of US savings and investment cannot and do not ‘cause’ our trade deficit. The true causes are surplus country policies, misaligned exchange rates and global labor oversupply. Persistent trade surplus countries export their oversupply and unemployment to deficit countries characterized by open economies and open financial markets. Policy leaders must become adept at determining the actual causes, how they are transmitted through national income identities and how they result in imbalances. Effective policy responses can then be designed to rebalance trade and capital flows, increase US employment and restore our economic growth.”

The paper shows why America’s economy grew when the majority of manufactured goods were Made in America and consumed by US consumers. The wages paid to the manufacturing workers who produced these products allowed them to save more because they earned more. When the U. S. lost 5.8 million higher paying manufacturing jobs from the 2000 – 2010 because American production was offshored to China and other Asian countries, American workers no longer had any money to save. The overproduction of trade surplus countries resulted in a glut of cheap imported products that further depressed or destroyed some American manufacturing industry sectors. The cheap imported goods that consumers bought became a curse rather than a blessing.

Therefore, the preposterous premise of many macroeconomists that low savings create trade deficits was proven false. It is incomprehensible to me why macroeconomists don’t understand that you can’t save if you don’t have a job or your non-manufacturing job is paying way less than your manufacturing job did. This is why I strongly support the recommended policies of the Coalition for a Prosperous America and urge you to do so also.

Posted in Economic Development, Economy | No Comments »

Denver’s Project DIY Increases Knowledge of Advanced Manufacturing Careers

September 2nd, 2017

During the first week of summer, June 5 – 9, 2017, the Community College of Denver (CCD) Advanced Manufacturing Center (AMC) hosted their second week-long camp for high school girls, giving them the opportunity to learn hands on about advanced manufacturing, to include machining, welding, architecture, and engineering graphics/3D printing. The camp was sponsored by The Women’s Foundation of Colorado, Denver Public School’s CareerConnect, and the Soeurs de Coeur Fund.

CCD’s Advanced Manufacturing Center is a state-of-the-art 33,280-square-foot facility offering degree and certificate programs in machining and welding. CCD also offers continuing education courses for CNC machinists, welding certifications, and wire EDM training allowing for workforce advancement.

When I interviewed Janet Colvin, Manufacturing Pathways Campus Coordinator at the Advanced Manufacturing Center at CCD, she said that they had two one-week summer camps in 2016 for nine girls each week, but this year, they had 28 girls in a one-week camp. This format change allowed girls to participate in paid six-week post camp internships with local companies that are involved with the Denver Public School (DPS) CareerConnect program.

With regard to the selection process, Janet explained that the AMC staff worked with DPS staff Denver Public School to select girls who were interested in the engineering, manufacturing and “Maker” career pathways.

She described how each morning began with the students doing team building activities, campus tours, and other role playing exercises. The following is a summary of the week’s activities as Janet described them:

On Monday, the girls visited an architectural company, RNL Design, where two female architects spoke to the girls about careers in that field and gave them a tour of their design center. The girls completed an architectural drawing using SketchUp, origami building project, and participated in an architecture photo scavenger hunt in downtown Denver.

Tuesday was devoted to engineering, graphic and mechanical design at the CCD Mechanical Engineering Graphics lab. Each girl was able to design and 3D print her own fidget spinner using SolidWorks. Debra Wilcox, the owner of a local 3D printing store, also came to speak to the students.

The girls toured two Advanced Manufacturing companies on Wednesday. At Sundyne, they met mechanical engineers and saw a part being made on a 5-axis CNC machine. The tour also provided lessons in the importance of safety from a female member of the local chapter of the American Society for Safety Engineers. At Eldon James, a women-owned plastic injection molding company, they watched plastic parts being molded. A member of the Colorado chapter of Women in Manufacturing (WIM) of which Janet is also a member, spoke to the girls about careers in manufacturing.

Thursday was spent at CCD’s Advanced Manufacturing Center doing manual machining using mills and lathes to drill a hole in a CNC-machined medallion. Stacey Bibik, president of Focused on Machining, spoke to the girls about careers. For welding, the girls used both simulators and actual welding equipment under faculty supervision. They had the opportunity to meet and interact with manufacturing college students at the AMC. In the afternoon, they toured a glass recycling company, Clear Intentions.

In the morning of the camp’s last day on Friday, the girls worked with faculty to finish their projects and learned how to create a plasma-cut DIY sign in welding. In the afternoon, there was a graduation ceremony in which the girls had the opportunity to share their experiences. Guests included family members, CCD staff, women from the manufacturing community, and the Denver Public School CareerConnect program.

“The camp was a success because more than 25 professional women who are employed in advanced manufacturing companies participated in CCD’s camp, and 16 Community College of Denver staff, students, and faculty in architecture, machining, fabrication welding and engineering graphics helped design projects, presented, and coached girls,” said Janet Colvin, who coordinated the camp. “I can’t say enough about the companies who participated. One of the key goals of the camp was to provide opportunities where girls could visualize themselves in manufacturing careers, and these business partners helped us achieve that goal.”

Janet stressed that one outcome of the camp was the change in the understanding of manufacturing skills and the potential future employment prospects in the Denver region.

The Project DIY team administered a test before and after the camp, which showed what the girls learned. Here are some of the results of the camp:

Pre/post test showed increased knowledge of manufacturing careers and educational pathways; 74% of the participants agreed that the camp increased their motivation to pursue a career in Advanced Manufacturing; 78% of the girls indicated that they could explain the basics of how to make metal parts with a machine, compared to 29% pretest.
100% of the campers indicated that they learned new skills; 91% stated that the camp helped them learn more about their career interests; 100% recommended the camp to others.
Machining, welding, and the tours were listed among their favorite activities.
The post-test results showed that none of the girls thought Advanced Manufacturing was dirty work (compared to 39% in the pre-test).”
Two Project DIY attendees started paid internships in manufacturing with Denver Public Schools CareerConnect after the camp.

“As a result of the camp last summer, one girl changed schools to attend a school that taught welding,” said Janet. “Nine girls came back to complete the camp for the second time this summer. We follow up with all of the girls during the school year. We provide opportunities for the girls to participate in our large MFG DAY event and an international Maker Faire conference.”

CCD’s manufacturing programs offer the ability to earn an Associate of Applied Science degree in fabrication welding, machining or engineering graphics, and mechanical design. The college also offers a variety of basic and advanced certificate programs that are stackable —meaning students can earn a certificate and start working right away while continuing on towards more advanced certificates or associate’s degrees in their field.

Janet explained how CCD grew their Advanced Manufacturing Center programs and how they were funded. “We opened the center on July 21, 2015 after receiving a $3.5 million grant from the Department of Labor. Nine community colleges received this grant, called CHAMP. The grant enabled us to set up the center, buy the equipment, and develop the curriculum with the help of the local manufacturing industry. It was a four-year grant, so we have another half year of funding. We are researching other opportunities for continued funding for the center. We are a corporate training center, so we offer training for a fee to local manufacturers.” Janet said that if anyone wanted more information on ProjectDIY, they could contact her at janet.colvin@ccd.edu.

I shared with Janet that I have written numerous articles about solving the skills gap and attracting the next generation of manufacturing workers and am familiar with the Manufacturing Institute prediction that “Over the next decade, nearly 3.5 million manufacturing jobs will likely need to be filled and the skills gap is expected to result in 2 million of those jobs going unfilled.” I told her that I certainly hope that CCD will be able to obtain follow up funding for the Advanced Manufacturing Center and be able to continue their summer camps. I believe these types of summer camps are vital for attracting the next generation of manufacturing workers.

I told her that I believe that the manufacturing industry is the foundation of our middle class, and that our country’s national security and prosperity depend in large part on a strong manufacturing industry. This is why I wrote my book, Can American Manufacturing be Saved? Why We Should and How We Can, and am now working on a sequel titled Rebuild Manufacturing — the Key to American Prosperity, which I hope to have published by the fall.

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Mira Costa College’s Technology Career Institute Fills Manufacturers’ Training Needs

September 2nd, 2017

For nearly twenty years, the only place to get the training through the community college system to become a machinist was San Diego City College. Now, however, there is a second location for civilians to get training as a machinist in San Diego County at the Technology Career Institute (TCI) of MiraCosta Community College. MiraCosta College is a public California community college serving coastal North San Diego County. The main campus is located in Oceanside, and there is a second campus in Cardiff-by-the-Sea.

The reason I mention training for civilians is that from 1923 – 1993, the Navy had a machinist school at the Naval Training Center, San Diego. NTC ceased providing training at the end of 1993 as a result of the Base Realignment and Closure (BRAC) commission of 1993. The machining training was transferred to the Great Lakes Naval Training Center in Illinois. There is still a machine shop at the North Island Naval Air Station on Coronado Island that offers training for entry-level Navy machinists to become journeymen. There is also the Workshops for Warriors, about which I have written previously, that has been training Veterans in machining and other manufacturing skills since 2011.

Last October, I visited the Technology Career Institute (TCI) during San Diego’s Manufacturing Week (associated with the national MFG Day on October 5^th). I met Linda Kurokawa, Director of Community Education & Workforce Development, and finally had the opportunity to interview her in depth last week.

My first question was: When did TCI start and whose idea was it? Linda said, “The Technology Career Institute officially opened in its current location in Carlsbad in March 2015, and it was actually my idea.” She explained, “I started it because I felt that San Diego North County needed a technical training center to provide low cost and accelerated training. We wanted to get young people and Veterans trained for good paying jobs. For about five years, I had been asked by local manufacturers and the local chapter of the National Tooling & Manufacturing Association (NTMA) to start a machinist program. But, I had no money, no instructors, and no equipment.

I decided to see if there was a way it could be done. I worked with the City of Oceanside and asked if they had an empty building. They did since it was during the long-lasting recession. I talked to leaders in the local industry to see if we could raise the funds to get the equipment. The MiraCosta Foundation helped us get donations to buy some of the equipment. One donor even gave $50,000. I worked with Haas Automation®, Inc., and we got some automated machining centers through an ‘Entrustment’ arrangement.”

Continuing, she said, “When we were in the planning stage for TCI, I was advised to make sure the course met the needs of the manufacturers, so we had manufacturers review our curriculum. We also visited training centers all over the country to learn about best practices. We started our machining program in the spring of 2013 at the Oceanside location. The program was very accelerated ? the students went every day, five days a week, for eight hours a day. The NTMA helped me find our first instructor, a woman who was retiring from the Navy and had taught machining skills on board ship to sailors.”

When I asked how they wound up at the current facility in Carlsbad, she responded, “I realized that with the small facility we had, we could only train a few students at a time. I heard about a grant available through the Department of Labor, and I hired a grant writer. We submitted our proposal and won a $2.75 million grant, which allowed us the funds to buy the equipment we needed to double the size of our machining program and also establish an engineering technician program.

We looked for a larger empty building and found one in the city of Carlsbad. We worked with city officials to get a low rent, as we are entirely funded by student fees. It was a mutually beneficial arrangement. Carlsbad is helping to fill the talent pipeline and helping residents in North County find technical training, and we provide the training in a low cost building.

We moved into our 23,000 sq. ft. building in early 2015 and had the time and space to start night and weekend classes using modules from our daytime accelerated program. We are GI bill approved and funded through Workforce Innovation and Opportunity Act funds and state funds, which are only available about five months of the year before the funds are exhausted. Our fees are high per student (about $6,000), so I wanted to find another grant. The Girard Foundation did help out by funding one semester last year.”

I told Linda that I had seen the press release about the MiraCosta College being one of the recipients of the more than $111 million America’s Promise grants that were awarded on November 17, 2016 by the U.S. Department of Labor “to 23 regional workforce partnerships in 28 states to connect more than 21,000 Americans to education and in-demand jobs.”

The press release stated, “Each four-year grant will support tuition-free education and training that prepares participants for jobs in industries that currently utilize the H-1B temporary visa program to meet industry workforce needs. Grantees will use individual assessments to determine the best strategies to successfully move participants into middle- to high-skilled jobs including accelerated training, longer-term intensive training and up skilling current employees to meet the demands of higher skilled jobs.

Grantees will focus their activities on four key priorities:

Increasing opportunities for all Americans through tuition-free training for middle-to high-skilled occupations and industries.
Expanding employer involvement in the design and delivery of education and training programs.
Utilizing evidence-based sector strategies to increase college completion, employability, employment earnings and outcomes of job seekers.
Leveraging additional public, private and foundation resources to scale and sustain proven strategies.

Funded through fees paid by employers to bring foreign workers into the U.S. under the H-1B temporary visa program, America’s Promise grants are intended to raise the technical skill levels of American workers and, over time, help businesses reduce their reliance on temporary visa programs.”

Linda said, “I wrote my own grant this time, and we were the only college in California to receive the grant of 6 million over a period of four years. We are six months into the grant, so we still have 3 1/2 years left. We are sharing some monies with Grossmont Cuyamaca College in east San Diego County and Chaffey College in Riverside. The grant funds have allowed us to eliminate tuition fees and reduce administrative fees down to a modest $375. However, the America’s Promise grant is not a long-term solution. ”

She explained, “Our local manufacturing industry is composed of such small companies that there isn’t enough extra money from these companies to be a sponsor for a machining school. However, we do get small donations of money and donations of metal materials used by the students, as well as donations of some equipment.”

I told her I understood because this is the type of company I represent as a manufacturers’ sales rep – companies that are typically under 25 employees, and I even represent two San Diego North County companies that have less than 15 employees. I mentioned that I had read the sector report on Advanced Manufacturing released in November 2015 by the San Diego Workforce Partnership (SDWP). It stated that” 97 percent of all Advanced Manufacturing businesses are businesses with fewer than 50 employees. Small businesses in this sector also account for 36% of all employees and for a third of all generated annual revenue.”

When I asked what is coming up, she said, “We are excited about launching our apprenticeship program for Machining Technician, CNC machine operators, engineering technicians, electronic assembly, and solar PV in the next few months that have been approved by the State of California Apprenticeship Standards. We will do the pre-training at our facility and monitor the students On the Job Training. We will have an Advisory Board, and already have a couple of companies lined up for the apprenticeships. We are also partnering with Able-Disabled Advocacy for a small portion of their $3.2 million grant for apprenticeships from the Department of Labor that they were awarded in November 2015.

As we concluded our discussion, Linda commented, “One of the benefits of having a big training center is that we will be able to make changes amongst our local manufacturers. Our students are being directed to the companies where they will be able to have a decent paying job. When companies come to us asking why they can’t get our graduates to go to work for them, we have to explain to them it is because they are not paying a living wage. We are helping them realize that they need to pay higher wages to get and keep better employees.”

I responded that I had heard that San Diego ranks in the top 10 (9^th) of most expensive places to live according to Inc. magazine, so it is tough to make it when the wages in San Diego are so much lower than cities that are higher up on the list like New York, Boston, and San Francisco. That is why it is important to get the training and/or education needed to be able to get a higher paying job here, and why it is so important for companies to pay competitive wages. The SDWP report identified advanced manufacturing as one of the priority sectors for job growth, so the Technical Career Institute is an important addition to San Diego County’s training infrastructure.

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North Dakota’s Northern Plains UAS Test Site

July 12th, 2017

When I was first invited to North Dakota, the plan was for me to visit the Northern Plains UAS Test Site in Grand Forks, but it was about 80 miles away from Fargo, and the Site’s Director was going to be out of town the week of my trip.

My first thought was questioning why North Dakota was selected as one of the six UAS test sites compared to San Diego, which is home to Northrop Grumman’s Global Hawk and General Atomics’ Predator unmanned vehicles. I had given a presentation at the San Diego Lindbergh Chapter of the Association for Unmanned Vehicle Systems International in the spring of 2013 while they were collaborating to prepare a proposal for being selected as a test site and was surprised when San Diego was not selected.

I posed this question to my host, Paul Lucy, the first evening we met during my trip, and he supplied part of the answer. It turns out that the University of North Dakota in Grand Forks had a long history of training airline pilots starting in the late 1960s and more recently expanded into training pilots for unmanned vehicles.

In December 2013, the Federal Aviation Administration selected North Dakota to be one of the six test sites, officially known as the Northern Plains UAS Test Site. According to the website, the mission is: “Collaborate with FAA and industry partners to develop equipment, systems, rules, and procedures to safely integrate unmanned aircraft into the NAS without negatively impacting existing general or commercial aviation.”

After I had written my other articles about North Dakota, I set up a phone interview with Nick Flom, Executive Director of the Northern Plains UAS Test Site. He took over the position in 2016 after the founding Executive Director, Robert Becklund, was promoted to Brigadier General and Deputy Adjunct General for the State of North Dakota. However, Nick is not new to the center since he was Becklund’s first hire when the site was established.

Nick provided me the rest of the answer as to why North Dakota was selected. He said, “When they were preparing for the selection process, the entire state went into what we called the “one voice” effort by the Governor, the North Dakota Department of Commerce, and the Office of the Adjunct General of the National Guard, the University of North Dakota, and other organizations in the state. Over $20 million was committed to establishing the UAS Test Site because the FAA test site designation did not include any Federal funding.”

As a point of reference, he told me that whole population of North Dakota is about 775,000, and there are only three Congressional Representatives. The population of the City of San Diego, California where I live is nearly double at 1.4 million.

He explained that “the wide open space of North Dakota was a big consideration, and there is no restricted air space because of population density. The FAA also wanted to diversify the test sites to reflect extremes of temperatures, and North Dakota has some of the highest and lowest temperatures of the U. S.”

The UAS Test Site website sums up the reasons why North Dakota was chosen as follows:

“Unequalled history, legacy, and culture of UAS.
Immediate access to uncongested airspace statewide and custom tailored to support your research.
Diverse climate and open terrain.
Unified commitment from North Dakota and congressional leadership, local industry, and key business decision makers.
State grant program to match funds from industry-academia research.
Strong relationship with Grand Sky, a UAS Business and Aviation Park at Grand Forks Air Force Base.”

When I asked what are his responsibilities, he answered, “We have a couple of different missions to integrate unmanned vehicles into the national air space: supporting industry as rules are being developed, providing the test environment for application-based processes in agriculture, building inspection, insurance claims, etc., and as an economic driver for agriculture and energy. We look at unmanned vehicles as an opportunity to diversify the state’s economy. Grand Forks has an Air Force Base that has underutilized space, and there was 217 acres in Grand Forks available to establish a UAS business park. The first two tenants in the park are General Atomics and Northrop Grumman. General Atomics has a flight training facility for their sales of vehicles to foreign countries. They were training their pilots to fly in civilian air space. Northrop Grumman flies Global Hawks out of the Grand Forks Air Force Base to support some of their military customers. We help support these capabilities and have the goal of flying beyond the line of sight using the radar system at the Grand Forks Air Force Base. Right now, when General Atomics is doing flight training, they have a chase airplane following along. When they can fly beyond line of sight, they won’t have to have a chase aircraft follow along and will be able to execute their mission at a lower cost.”

Nick Flom provided me with more detail about UND’s history of pilot training. He said, “UND started with two airplanes in the 1960s, and then added a helicopter program in 1980. Now, they have 150 airplanes for commercial aviation pilot training. They were the first university to add unmanned vehicle pilot training in 2010, and are now filling the increasing demand for unmanned vehicle pilots. They are the first university to offer a four-year UAS Operations Bachelor of Science degree in the U. S. We have a close relationship with UND, and we can leverage a lot of their research. The President of UND established the Research Institute for Autonomous Systems on the campus. The top leaders understand the importance of unmanned aircraft.”

Nick explained, “UND offers specialized training and curriculum development for UAS crew training and certification that includes human factors, safety management systems. It has an indoor UAS flight laboratory, a Predator Reaper Integrated Networked Computer Environment (PRINCE) simulator, a Predator Mission Aircrew Training System (PMATS) simulator, as well as a UAS Scan Eagle aircraft and simulators.”

From the University of North Dakota Aerospace home page, I learned that UND specializes in Unmanned Aircraft Systems (UAS) research, education and training for private industry, government, UAS researchers and UND graduates. The UAS research collaboration includes:

“UND Institute for Unmanned and Autonomous Research (IUAR)
John D. Odegard School of Aerospace Sciences
- Aviation, Atmospheric Sciences, Computer Sciences, Space Studies, Earth Systems Science & Policy
UND Aerospace Foundation
Northern Plains UAS Test Site (NP UAS TS)
UND School of Engineering
- Unmanned Aircraft Systems Engineering Lab
- Robotics and Intelligence Systems Lab
UND Department of Psychology
- Northern Plains Center for Behavioral Research”

From all of this information, I could see that it was entirely appropriate for the UAS Test Site to be established in North Dakota near University of North Dakota.

I asked Nick about funding for the UAS Test, and he responded, “The state of North Dakota has appropriated dollars to support the test center. We also contract with government agencies such as NASA and the FAA as well as private companies to do services for which we are paid.”

Before ending our discussion, I asked Nick what were the future plans. He answered, “It depends on the needs of industry. The ability to fly aircraft beyond line of sight is very important, along with the ability to safely perform operations over populated cities. Right now, it is one pilot per aircraft, but it may be possible to have one pilot flying more than one unmanned vehicle.”

In retrospect, I realize that San Diego County would not have been a good choice for a FAA test site as we have too much restricted air restricted air space due to three military airports, San Diego’s Lindberg Field international airport, several small airports spread throughout the county, and the Tijuana, Mexico international airport right across the border. In addition, the population of San Diego County is 3.3 million, and there is only a small variation in temperature from winter to summer. There is no doubt in my mind now that North Dakota was a good choice for being selected as one of the six designated test sites.

Tags: career technical training, test site, unmanned vehicles
Posted in Economic Development, Innovation, Technology, Training | No Comments »

North Dakota Manufacturers Ride Innovation to Rapid Growth

June 13th, 2017

On the second day of my visit to Fargo, North Dakota, we went to see Andy Dalman, President/CEO of Advanced Bone Technology, which is developing SimuBone, a product that replicates a human bone. SimuBone is the first product to combine internal and external geometrical precision with mechanical properties adaptable to customer specifications, providing the look, feel, and performance desired in a clean, biohazard free, consumable product.

Andy said, “We are only a three-person team now, working out of our own apartments because we are all still students at North Dakota State University. I was part of a professor/student team that performed the initial research starting in 2012, and I was the student. But, I am in my final semester. We have a patent pending, and the University owns a portion of the patent. The standard for device, therapy, and procedure development is human cadaver or animal testing. My goal is to reduce the need for cadavers in medical research, medical device design, surgical training, public safety testing and more. SimuBone has no biological components and can be manufactured on-demand at a fraction of the cost of alternatives.”

He explained, “We make artificial bone out of composite materials using additive manufacturing (3D printing). We can replicate many different bone parts for use in education. We can produce a model based on a CT scan, which can be interpreted into a 3D model in liquid silicone. We own all of our own equipment and have been buying standard equipment that we modify. We use some modified Foam Labs equipment now because we don’t need to go to very high temperatures.”

I asked, “What other opportunities exist? Andy responded, “We have the opportunity to revolutionize medical training by providing realistic feedback without using a cadaver. Right now, medical training uses plastic models – plastic melts or burns. However, orthopedic and dental are two of the slowest industries for adopting new innovation.”

He added, “Our vision is to determine what it would take to become an in body implant company. We have a feeder grant through the North Dakota Department of Commerce. We are “boot strapping our company and have raised $140,000, but our total investment has been $200,000 to date. Of this amount, $120,000 has come from North Dakota, and another $25,000 has come from a grant from VentureWell as one of their E-team members.”

When I asked how they are marketing, he answered, “We are still figuring that out, but we are reaching out to more innovative dentists and doctors. We are currently marketing for dental applications and allowing students to give feedback. The properties of the material are bio compatible, but we are currently working on out of body applications because it is a long approval process for implant parts. We spoke to orthopedic doctors before we were ready. We do know that our market will be high dollar and low volume.

Our next stop was Appareo, which designs, develops and manufactures innovative electronic and software solutions for original equipment manufacturers, as well as direct-to-market.

We met with COO David Batcheller and Brenda Wyland, Director of Marketing. Appareo has established itself as a recognized leader in the custom design, development and manufacture of innovative electronic and software solutions within the industries of aerospace and agriculture.

Batcheller said, “Appareo was founded in 2003 and moved into the NDSU Technology Incubator when it opened in 2007. We started designing and manufacturing flight data recorders for airplanes and helicopters. Once we employed 50 people, we built our current building near the incubator in the Research Park and moved into it 2010. In 2013, we expanded our manufacturing facility to accommodate a second production line, but we quickly outgrew our space and purchased the adjacent manufacturing facility in 2014.”

He said, “Appareo’s proximity to the NDSU campus played an important role in the company’s growth. We have access to the product of NDSU, which produces some of the finest minds in the nation. ”

He explained. “Through the creative application of cutting-edge technologies, we create complex end-to-end solutions that include both mobile and cloud-based components. We are an accredited FAA Parts Manufacturing facility and are ISO 9001:2008 certified. All of our products are designed, developed, built, and supported in the USA. While our engineering and manufacturing expansion takes place in Fargo, we continue to expand our engineering capabilities with teams based in Tempe, Arizona and Paris, France. Having Appareo offices in Paris and Tempe is critical for building upon our global presence, but we have an unwavering commitment to Fargo as our home base. We’re fortunate to have access to a rare talent pool here; some of the most passionate, brightest high-tech engineering minds in the nation.”

He added, “Contributing to the growth of our agricultural business is a joint venture with AGCO Corporation, the world’s largest OEM dedicated solely to agriculture. Under the joint venture, called Intelligent Ag Solutions, we develop innovative electromechanical devices and systems, as well as technology for advanced machine control systems. We are the only company controlling agricultural products by WIFI. We work with agricultural equipment manufacturers to infuse these technologies into their equipment.

We have developed another new family of products under the Stratus brand to meet the aviation needs to comply with the FAA mandate that requires all aircraft operating in airspace that currently requires a Mode-C transponder to be equipped with ADS-B Out before 2020. This family of products, a portable receiver, transponder, and TSO charging port, provides real-time weather and traffic information directly to pilots in the cockpit.”

His concluding remarks after we toured the shop floor were: “We have established a trajectory of rapid growth, averaging a compounded annual growth rate of more than 45%.”

Then, we drove 40- miles south of Fargo to Wahpeton to visit two companies, Giant Snacks, Inc. and ComDel. At Giant Snacks, we met with General Manager Lucy Spikermeir. Giant Snacks is a manufacturer of large sunflower seeds, pumpkin seeds, and most recently, pistachios.

Lucy said, “The President, Jay Schuler, took over his father’s business. We came out on our own to be only the second company to specialize in large seeds. We select sunflower farmers with proven excellence for growing large sunflower seeds. We work with each farmer during the growing process and monitor the seeds as they are processed, cleaned, seasoned, and roasted to perfection. We had the roaster custom built for us. We are using more and more robotics and automation in our plant.”

When she gave us a plant tour, I was quite impressed with the size of the tanks for the processing and cleaning of the seeds. They are huge – possibly 10-12 ft. in diameter and 12 – 15 ft. high. Their roaster is nearly as big, and everything from the transfer of seeds from one stage to another as well as the filling of the individual bags is all automated. There were actually only about 15 people working on the shop floor to do everything from processing the incoming seeds to packing the bags into shipping boxes. They design their own boxes so they can be used on their automated line.

Lucy told us, “For many years, Frito Lay was the official snack for all of the pro baseball teams except for Minnesota teams. The players really liked the larger size of our sunflower seeds and the variety of the seasonings. The Minnesota teams must have shared their snacks with other teams because we were called by the new snack manager of the dugouts asking if we could provide seeds for more teams. Now all but one of the major league dugouts uses our seeds.”

She explained, “We get out pumpkin seeds and pistachios from California, but our sunflower seeds are grown locally. In the upper Midwest, we have a 70 percent market share. We are experiencing big growth in Texas and the West, but nationwide, we only have a 15 percent market share. About 80 percent of our sales are in gas stations and convenience stores, but we are getting into more chain stores. We own the land, so we could triple the size of our building. We have 35 employees, but it is still a very seasonal business. January through March is slow for sunflower seeds. This is why we added pistachio seeds to our line. We are growing double digits every year, and we will continue to add new products and new seasonings.”

I really hadn’t eaten sunflower seeds since childhood, so had no idea of the variety of seasonings: Dill Pickle, Toasted Coconut, BBQ Ranch, Spicy Garlic, etc. Lucy gave me my choice of flavorings for bags of sunflower seeds, pumpkin seeds, and pistachios, and my family enjoyed them all when I returned home.

Our last stop was ComDel Innovation, where we met with President Jim Albrecht, CFO Bruce Weeda, and General Manager Art Nelson. ComDel Innovation is a precision manufacturer that supports their customer’s commercialization process, integrating all aspects of product development under one roof. ComDel Innovation’s contract manufacturing services include injection molding, assembly operations, precision machining, fabrication of tooling and stamping dies, metal stamping & forming, thread rolling and metal finishing.

Jim said, “Our site was founded in the mid 1970s as a 3M manufacturing location, which was spun off to Imation in 1996. ComDel Innovation was formed when Imation decided to exit manufacturing in 2007. Many of our initial employees worked for 3M and Imation, providing a tremendous nucleus to form a company around. About four years ago, ComDel Innovation created an ESOP as a way to recognize the employees for their contribution to the success of the business. The name ComDel Innovation represents our commitment to deliver innovation and results for our customers. The value offered is in support of customer’s product development needs and providing high quality products. We operate in two buildings totaling 260,000 sq. ft., running 24 hours a day and 360 days a year. ComDel Innovation started with 60 people in 2007 and is currently at 275 employees. Much of our business is the result of working with customers in the U.S. Over the past few years we have seen opportunities to work with business that are reshoring products from other regions of the world.”

I asked if they are a Lean manufacturer, and Jim said. “We had great heritage, as part of 3M and Imation, where lean principles and the continuous improvement tools were taught and implemented throughout the organization. ComDel Innovation carries those tools and practices forward in support of our customers. We also utilize a Total Quality Management Program to manage the quality of materials we purchase. High-end computer-aided engineering software is integrated into our design process for custom assembly equipment, molds, tooling, and fixtures. CAD/CAM software is leveraged for our precision machining and grinding operations.

During the plant tour, I could see why ComDel Innovation is successfully capturing business and why businesses would consider them for reshoring product to the U.S.I saw considerable automation being used in their plastic injection molding, machining, and metal forming departments. ComDel Innovation utilizes assembly cells for low to high volume production. They use robots for removing parts from machines in the injection molding, machining, and metal forming departments. They have a Materials Laboratory to perform complete thermal and mechanical testing for thermoplastic resins and conduct failure/defect analysis. It is apparent they have invested a considerable amount of money in utilizing state-of-the art equipment and systems. This is the path that American manufacturers need to take to be competitive in the global marketplace.

As I ended my trip to North Dakota, I can envision the North Dakota Department of Commerce realizing its goal of expanding its manufacturing base by fostering emerging companies and supporting the growth of existing companies. With its very favorable business climate, North Dakota maybe able to attract companies from other upper Midwest states like Michigan, Wisconsin, and Minnesota.

Tags: American manufacturing, artificial bone, incubator, innovation
Posted in Accelerators/Incubators, Innovation, Manufacturing | No Comments »

NDSU Research & Technology Park Leads Region in Job Creation

May 31st, 2017

On the first day of my visit to Fargo, North Dakota, I met with Chuck Hoge, Executive Director of the North Dakota State University Research & Technology Park (RTP), which is “dedicated to enhancing the investments in North Dakota State University by the citizens of North Dakota. The development of facilities and research centers conducive to cutting-edge research is also part of the NDSU Research and Technology Park.” The Research Park operates a 50,000 sq. ft. technology incubator, which offers space, facilities, and services to technology-based entrepreneurs and businesses.

Mr. Hoge also serves on the Fargo Moorhead Growth Initiative Fund Board. Prior to the Research Park, he was president of the Ottertail Corporation Manufacturing Platform for six years, and before that, he was president and CEO of Bobcat Corporation.

Mr. Hoge said, “I was on the board of directors of the Park before I became Interim Director in 2013 and the Executive Director in 2016. The Research Park is a 501 (c3) corporation with its own Board of Directors. The Park is home to two NDSU research buildings, the John Deere Electronic Solutions building, and two buildings occupied by Appareo, one of our Incubator graduates.”

Explaining the purpose of the research park, he said, “The Park’s goals mirror those of the State of North Dakota. Our shared mission is to diversify the economy through high-tech STEM jobs, develop the workforce and provide valuable, in-state career opportunities for North Dakota students. In the past, many of NDSU’s 15,000 students were seeking well-paid, high-tech positions out of state, so we made it our goal to create those opportunities for them in-state. The Research Park has created 1,339 direct jobs, of which 52% are held by graduates of North Dakota colleges and universities.”

“In the Incubator, our mission is to help companies succeed faster, which is why we have two of our partner organizations in the Incubator; the Small Business Development Center (SBDC) and the Bank of North Dakota. The SBDC helps startups with anything from business plans to financial modeling and because the Bank of North Dakota is the only state-owned bank in the country, they have many programs aimed at helping startup companies.”

When I asked for information about the founding of the Research Park and incubator, he said, “The Research Park was founded in 1999 and the incubator in 2007. Our funding sources were a combination of private donations, a State Centers of Excellence grant and an EDA grant.”

Hoge, said, “The Bank of North Dakota isn’t the only state entity creating programs for local startups. The Department of Commerce’s Innovate North Dakota program provides up to $32,500 in startup funds to companies in four phases ? $2,500, $5,000, $10,000, and $15,000. In the last couple years, we had over 50 companies in the Fargo area use the program to kick start their companies with a great success rate. The program doesn’t only provide monetary support; the company founders attend entrepreneur training boot camps to network with fellow founders and learn from world-renown entrepreneur, Dr. Jeffery Stamp of Bold Thinking, LLC.”

He told me that the incubator has 12 current incubator clients and has graduated five companies: Appareo, Fargo 3D Printing, Intelligent InSites, Myriad Mobile, and Pedigree Technologies.

“In addition to programs designed to target local entrepreneurs, we also have a student competition called Innovation Challenge, where $27,000 is awarded to teams of NDSU students with the most innovative ideas. Through three rounds of judging by industry professionals, the students are challenged to pitch their innovations through a written proposal, a trade show scenario and a mock fundraising pitch. We want to inspire students to think about entrepreneurship as a career path and we use innovation as the gateway to entrepreneurship. We had three companies get their start in Innovation Challenge last year and we are hoping for more this year. The program is financially supported by a combination of a University Center EDA grant, state matching funds and contributions from local businesses and organizations.

The Incubator Manager, John Cosgriff, has a background in venture funds, and he assists companies with intellectual property, human resources and raising capital. We have monthly founder meetings where the entrepreneurs advise each other and ‘Lunch and Learn’ events where founders learn from and network with industry experts.”

After I returned home, I was emailed an Economic Impact Study released November, 2016, and a few highlights are:

Its companies support an estimated 1,300 indirect jobs in the Fargo-Moorhead area.
Its companies employ 489 graduates of NDSU (37% of total RTP employment)
Another 202 are graduates of other North Dakota University System schools.
107 student interns are employed by the RTP companies.

While at the Incubator, we met with Chad Ulven and Corey Kratcha, who are the co-founders and CTO and CEO, respectively, of one of the incubator tenants, c2renew, which “uses proprietary biocomposite formulations to design materials, compounds, and parts that satisfy demanding engineering specifications.” With this technology, it is possible to take advantage of lower-cost, renewable resources while meeting, maintaining, and even improving upon the mechanical properties required for a product.

Dr. Ulven said, “I was trained in advanced composite materials when I was in graduate school and at the Aberdeen Proving Grounds Army Research Laboratory. Then I became faculty at NDSU researching agricultural products for use as fillers for composites. I wanted to use a variety of materials and built several predictive models based on biomass constituent make up. I met Corey by chance, and we decided to take the technology out of the lab and spin it off to make products. We started working with big companies like Bobcat and John Deere, but the time to market was too long.”

He explained, “We decided to target companies that are focused on new products and started working with EarthKind to develop consumer market products using a PLA based resin along with flax fiber.”

They showed us some of the products where their materials are used:

EarthKind Pouch Pod – All natural repellent holder that uses flax sourced from North Dakota farms as the filler to the resin.

Bogobrush – An eco-friendly toothbrush where materials, production, and shipping all take place in North Dakota and the surrounding area. The company gives a toothbrush away for everyone bought.

Corey said, “In a partnership with 3DomFuel, we have developed a collection of bio-based 3D printing filaments called c2composites. Our expertise in biocomposite formulation matched with the expertise 3DomFuel has in producing filament means that anyone with a 3D printer capable of printing PLA can print with the following custom filaments:

Wound Up – a coffee plant fiber waste filled filament

Buzzed – made from byproducts of beer production

Entwined – made from industrial hemp

LandFilament – made from upcycled municipal solid waste

We have created many different biocomposites for various customers, but we had never created anything that was 100 percent done for us. So we thought about ways to take one of our favorite things, coffee, and use it in a new and innovative design. We developed the c2cup by creating a new biocomposite formulation that is a hybridization of a bio-based resin and coffee plant fiber. We then used this biocomposite to make 3D printer filament and printed the first coffee cup. The biomass resources we use are taking the waste off the hands of the producer to be utilized in a rapidly renewable manner. We use carbon rich byproducts that also have high lignin content that improves a material’s UVA resistance. We look at how we can meet performance specifications by finding a solution that is bio-based, renewable, and sustainable.

We have a 9,500 sq. ft. production facility in a nearby industrial space. We have at least two interns from NDSU at any one time that we meet through the Incubator and other meetings.

We now have experience working with a wide variety of thermoplastics including: PP, PE, PLA, ABS, ABS/PC, and PA, and a wide variety of agricultural inputs are possible as fillers:

flax fiber
wood flour
hemp fiber
sunflower hull
dried distiller grains with solubles
soybean hull
oat hull
sugar beet pulp

Our formulations are more environmentally responsible since the petroleum feedstock can be replaced with agricultural byproducts which would otherwise be left to decay in the soil or be sent to the landfill.”

Chad told me about the collaboration they are doing with NDSU researchers to spin out c2sensor, as a result of the “development of a micro-sensor made from biocomposites and non-bioaccumulating metals. He said, “The Sensing Earth Environment Directly (SEED) Sensor can be placed during planting for in-situ measurement of soil conditions, as opposed to current methods which often require a combination of direct (i.e. soil sampling) and indirect measurements (i.e. remote sensing).

Biodegradable materials used in SEED Sensors allow them to degrade after use where planted without adding toxins to the soil. Since wireless communication with the sensor is based on passive radio-frequency identification (RFID) technology, batteries are not required for operation. This technology has been tested in lab and in field trials.”

Chad said, “The SEED Sensors provide:

Salinity levels for allowing adjustments as needed
Nutrient levels for variable rate fertilizer applications
Moisture levels to have more focused irrigation
pH levels to more proactively manage inputs
Real time soil analysis for end of year fieldwork
couple with aerial mapping via UAVs or satellite imager”

At the end of our visit, Chad said, “We also provide engineering services to help design, analyze, and develop plastic and plastic-composite parts for virtually any application. While we specialize in utilizing natural and recycled materials in place of virgin polymers, we also produce solutions with more tradition materials like fiberglass and carbon fiber.”

If c2renew is an example of the cutting edge technology of the startup companies in the Incubator, North Dakota will certainly be able to reach its goal of accelerating the growth of startup and emerging companies to expand their manufacturing base and keep college graduates from leaving the state. The Park’s website describes the success to date: “The NDSU Research & Technology (RTP) Park and its companies have seen tremendous growth over the last five years according to a survey conducted by EMSI in 2010 and repeated by the RTP in 2015. As of December 2015, there were 1,105 jobs at companies located in the park and 234 jobs at RTP incubator graduate companies located around the Fargo-Moorhead area. This is a 50 percent increase over the number of jobs at the end of 2010.”

It would have been great to be able to visit with more Incubator tenants, but we had other more established companies to visit the rest of the day that I will discuss in my next article.

Tags: economic development, incubators, job creation
Posted in Accelerators/Incubators, Economic Development, Innovation, Manufacturing | No Comments »

North Dakota Focuses on Accelerating Growth of Emerging Companies

May 24th, 2017

The last week of April, I visited the Fargo, North Dakota region as the guest of the North Dakota Department of Commerce’s Economic Development & Finance Division, which is charged with coordinating the state’s economic development resources to attract, retain and expand wealth. My host was Paul Lucy, former director of the Economic Development & Finance Division, and we visited several companies and met with heads of organizations working to accelerate the growth of emerging companies and retain successful existing companies.

For many people, the only impression they have of Fargo is based on the movie and subsequent TV series of the same name. I never saw the movie and haven’t watched the TV series, but have a cousin in Fargo who is always bragging about what is happening, especially what celerity is coming to perform. I learned that the Red River is the boundary between North Dakota and Minnesota, and about 230,000 people live in the greater Fargo/Moorhead region. It has one private and two public four-year universities, along with several community, technical, and business schools. With nearly 30,000 college students, it is a college town that rivals any in the nation.

As we began our first day of appointments, Paul said, “There are development projects in motion that have a vision of making downtown Fargo a more vibrant place to live and work, which could lessen urban sprawl and result in more efficient investment in city infrastructure and services. An added bonus would be the preservation of more of North Dakota’s fertile farmland for agriculture production.”

Our first appointment was a breakfast meeting at Emerging Prairie, a co-working space in downtown Fargo. We met with Greg Tehven, Executive Director of Emerging Prairie. He said he grew up on a farm and is a 5^th generation North Dakotan. When he was attending the University of Minnesota, he remembers that one of his professors recommended that North Dakota be turned back to the prairie because from 1930 – 2000 there was a “brain drain,” when the best and brightest left the state.

Greg said, “I never intended to go back to North Dakota when I graduated, but while I was an undergrad at the Carlson School of Management at the University of Minnesota in 2003, I co-founded Students Today, Leaders Forever. After graduating, I joined the Kilbourne Group and worked on a variety of projects to stimulate growth and entrepreneurship in downtown Fargo.

He explained, “I burned out and worked my way around the world in 2010. I had a Rotary Ambassador scholarship and got accepted to the University of Manchester to study social change in 2011. I had a year before I started school, so I worked for Doug Burgum for a year and discovered “urbanism.” When I gave a TEDx Talk in Minneapolis, I made a conscious choice that instead of studying social change, I wanted to practice social change.”

He said, “Three of my friends and I founded Emerging Prairie in 2013 to turn Fargo into a vibrant startup community. Our mission is to connect and celebrate the entrepreneurial ecosystem in Fargo-Moorhead. We do so by operating a wide variety of events and initiatives, such as the Drone Focus Monthly, the Prairie Den co-working and event space Hackathon, Meetup groups, and the Intern Experience. We have TEDx Fargo, an independently organized TED event, and 1 Million Cups Fargo, the largest and most active 1 Million Cups program in the country.

We support tech-based entrepreneurs. We are not very involved with manufacturing – most of our entrepreneurs are in software. We provide entrepreneurs: (1) a founders-only retreat (2) a platform to share their work and investment opportunities, and (3) access to consultants. I believe in transfer of information, but not a formal mentor relationship. We have to make it a “cool” climate for college students. We host midnight brunches and do a lot of weird and strange things. We have 144 members of our co-working space, modeled like a student union. We have no desire to maximize profits, but to maximize impact. Millennials are wired to maximize impact rather than maximize profits.”

He expanded, “We host the Ted Ex Fargo and will have about 2,000 people at the event this summer where the CEO of the Kauffman Foundation will speak. We host an Ecommerce conference in Moorhead. We support the drone industry and run a drone conference that started two years ago with 240 attendees the first year and 330 the second year. We expect about 600 people this year on May 31^st. We host different other events and also operate an online publication that highlights the regions entrepreneurs and innovators that are turning Fargo into a flourishing tech hub. In 2016, we became a 501(c) 3 non-profit.”

Our next visit put what Greg has said into perspective. We visited the Greater Fargo Moorhead Economic Development Corporation (GFMEDC) where we met with James Gartin, President, Mark Vaux, Executive V.P, Business Development, and Lisa Gulland Nelson, V. P., Marketing and Public Relations. Mr. Gartin said, “Our goal is to be a key catalyst for business growth and prosperity for the region. As far back as five years ago, we felt that we had a difficult situation because of our workforce and ability to attract new companies with our extremely low unemployment rate that is currently3.4%. Every time we get a RFQ, the first thing we get asked is: Do you have enough employees? We made a commitment early on that we weren’t going to take away employees from our existing employers. While we still work to attract companies to our region, we realized that if we need to work with our two universities to change the philosophy from ‘research for papers’ to ‘research for commercialization’ to facilitate start-up companies.”

He explained, “We have funded Emerging Prairie since its inception and are helping them to support entrepreneurism. We attend and support 1 Million Cups, where the entrepreneurial community meets with K-12 superintendants, organizes manufacturing tours for high schoolers, and recruits companies to our community.

He added, “Governor Doug Burgum’s son, Joe Burgum, is committed to making Fargo the best place on earth to live. He founded Folkways that is a community-building collective dedicated to supporting the region’s culture creators. He created the Red River Market, successfully lobbied to bring the ride-sharing service Uber to North Dakota, and puts on a course to help entrepreneurs launch local businesses.”

He said, “At North Dakota State University’s Research and Technology Park, there is great collaboration to make it a leader in developing Intellectual Property. Entrepreneur magazine ranked Fargo in the top 10 for entrepreneurism. We have a number of ‘0-60’ speed companies in operation, and a lot more that are on the cusp. The most important thing is that our senior leaders are seeing a difference in the growth of business. We modeled our approach after Brad Feld’s book, Startup Communities: Building an Entrepreneurial Ecosystem in Your City, based on Boulder, Colorado. The start-up phase is ten years, and we are only 4-5 years into the program. Cities can’t push entrepreneurism. You can’t make people start companies, but you can help to build the ecosystem.”

The supplemental material I was provided revealed that the costs of doing business in North Dakota are around 15 percent less than the national average because of the following:

* Research and development tax credits

* Corporate income tax exemption

* Property tax exemptions for new or improved buildings

* No personal property or gross receipts taxes

* No sales tax on eligible services, manufacturing or computer/ telecommunications equipment

* Seed and angel capital investment tax credits

* Early-stage financing resources

* State-sponsored workforce training grants

The GFMEDC website states, “Some of our largest employers include divisional, regional, national and global headquarters & facilities for Microsoft Business Solutions, Bobcat Co., John Deere Electronic Solutions, Border States Electric Supply, RDO Equipment Co., Tech Mahindra, Titan Machinery, Nokia HERE and American Crystal Sugar.” The Microsoft campus came about when Great Plains Software, Inc. was acquired in 2001. There doesn’t seem to be a dominant manufacturing industry in Fargo, as the list of top manufacturers includes farm and construction equipment, power equipment, windows/doors, metal fabrication, steel, and composites.

We also discussed the challenges of solving the skills gap and attracting the next generation of manufacturing workers. Mr. Gartin said, “Tip Strategies out of Austin, TX did an economic development strategy study for us on how to grow economy and our workforce. We have funded the plan and are implementing it. We have some of the most unique workforce strategies in the country. Industry and education mesh. We have a very robust manufacturing Day that we handle. We have funded a Maker Space in Moorhead and helped NDSU create a Maker Space, job shadowing and internships. We have a Tri-College University consortium. Students can take classes and get credit at any of the colleges and pay the same rate. Last year, the two-year technical schools collaborated so that students can take classes at any one for the same rate.”

Tri-College University is a unique consortium that allows students enrolled at any one of its five member institutions to take courses at the others at no extra charge, and to apply the credits toward graduation requirements at the home campus. The five member colleges are:

Concordia College – Moorhead
Minnesota State University Moorhead
North Dakota State University – Fargo
Minnesota State Community & Technical College – Moorhead
North Dakota State College of Science – Wahpeton & Fargo

When I mentioned The Playbook for Teens program I have written about that mentors middle school girls to get them interested in STEM careers, he said, “We think it needs to start in elementary school in the second or third grade when students are starting to learn math. At NDSU, there is an Engineers in the Classroom program where engineering students work in classrooms to teach math. They matched first and second graders with an engineering student to work with them on project based learning. It was tested in an 8-week program, and every student jumped up two levels. This year, there is an engineering student in every classroom, and the students are about to be tested. This could be the opportunity to show that this works, so that we can apply for a Pew grant to fund the program.”

Mark Vaux said, “Our business development program is based on attraction, business retention, and expansion. We visit at least 150 companies on an annual basis looking for opportunities and challenges, so we can help them through the challenges and barriers to growth and recommend actions to take. If companies are buying new equipment or adding workers, there are state programs that will help them.”

Lisa Gulland Nelson described some of the Workforce programs they have:

Operation Intern – primary sector business are eligible for matching funds of up to $30,000 per legislative biennium or $3,000 per intern for hiring North Dakota college students or high school juniors or seniors.
New Jobs Training Program – matching grants to assist qualified North Dakota employers in training or upgrading their employees’ skills.

Overall, I was impressed with North Dakota’s policies to provide a favorable business climate for its businesses and wish that California would adopt some of these same policies. The Fargo region is smart to focus on emerging businesses to retain their college graduates and keep them from going to other states for jobs. My next article will cover the incubator at the NDSU Research & Technology Park.

Tags: accelerators, create manufacturing jobs, economic development, jobs, workforce development
Posted in Accelerators/Incubators, Economic Development, Innovation, Jobs, Technology, Workforce Development | No Comments »

Workshops for Warriors Holds Successful Inaugural Gala

May 18th, 2017

On April 20, 2017, over 300 people attended the Workshops for Warriors Inaugural Gala that was held on the USS Midway Carrier Museum in San Diego, California. Former California Assembly member Nathan Fletcher, now a Professor of Practice in Political Science at the University of California, San Diego, was the Master of Ceremonies.

The WWII tribute trio, the American Bombshells, sang the opening national anthem and provided the entertainment later in the program. Founder and CEO of Workshops for Warriors, Hernán Luis y Prado, gave the welcoming remarks and showed the latest short video featuring testimonials by students on how WFW gives them a sense of potential again.

He said, “This evening’s celebration is in honor of the 388 Workshops for Warriors’ veterans, wounded warriors, and transitioning service members who have earned over 1,500 national recognized certifications. Our graduates work in advanced manufacturing centers throughout the U.S.A. and contribute $27 million to America’s economy every year. This number continues to grow. We are proud of their successes and contributions to our community, the manufacturing industry, and our nation as a whole.”

He briefly described how he and his wife, Rachel, had self-financed the training they began providing in their own garage in 2008 while Hernán was still in the service. He said that he heartsick at seeing too many veterans unable to transition successfully into civilian life and even commit suicide. When he ran into one of his buddies from his service in Iraq confined to a wheel chair after losing both his legs from an IED, he and his wife decided to invest all of their assets to expand into their first small building in early 2011. He had previously told me that they got their first outside funding from Goodrich Aerostructures, so that they were able to move into a building twice the size in October 2011.

Hernán said, “Many of you understand our Double Funnel dilemma…a waiting list of over 500 students but over 2,500 jobs available nationwide for each one of our graduates…The Challenge? There is only funding for 50 students every semester. Now is the time to take action to expand Workshops for Warriors with our $21 million capital campaign. This expansion would allow us to train ten times as many veterans and provide them with opportunities to serve America in a new role as they provide for their families and take part in the American dream.”

He extended his heartfelt thanks to Reliance Steel& Aluminum Company, and the Harriet E. Pfleger Foundation for being the Red, White and Blue sponsors for the evening. He said, “These contributors have been our “Champions,” whose dedication and continued support have made a meaningful and profound impact in helping Workshops for Warriors grow while changing the lives of veterans. For example, Reliance Steel provided funding to add 18 welding stations and add a new Computer Aided Design laboratory that allows an additional 18 CAD/CAM students every semester to receive our life changing training and certifications add several stations for CAD/CAM software training.”

He concluded his remarks saying, “I am extremely grateful to those of you who have chosen to take action. I am humbled by your commitment to our nation’s veterans and America’s manufacturing industry. In 150 years, people will look back on Workshops for Warriors as the birthplace of American’s advanced manufacturing renaissance. Thank you for supporting Workshops for Warriors.”

MC Fletcher then introduced Jim Hoffman, Executive V. P. and COO of Reliance Steel & Aluminum Company. He relayed the comments of President and CEO Gregg Mullins, who was unable to attend the event. He said, “Reliance Steel is a proud supporter of Workshops for Warriors, a nonprofit organization dedicated to providing fee training in welding, fabrication, CAD/CAM programming, and advanced machining to Veterans, Wounded Warriors and Active Duty personnel. Their mission is to equip the students with marketable skills and nationally recognized credentials so they can secure careers in manufacturing and achieve success in their civilian lives.”

He continued, “Workshops for Warriors is funded through private donations from individuals and companies like Reliance, and 83% of every dollar donated goes directly to the training programs. Over the years, Reliance has supported Workshops for Warriors by funding equipment purchases, forging partnerships with our industry peers, making donations, and hiring Workshops for Warriors graduate. We have held events among our employees to not only raise funds but increase awareness about the important work being done by Workshops for Warriors to serve a population that has so faithfully served our country. As they transition into the manufacturing sector careers, Workshops alumni continue to serve by contributing to our country’s economy.”

He concluded, “Workshops for Warriors’ Capital Campaign is underway, with a goal of raising $21 million to build a new facility that can accommodate ten times as many students as are currently enrolled. As the Capital Campaign Committee Chairman, President Gregg Mullins is personally calling on you for support. A great opportunity is here for us to give back to those who have gone above and beyond to protect us. Let’s do our part to help our men and women in uniform succeed and thrive.”

Next, Darnisha Hunter, Active Duty and Veterans Family Advocate from the Office of San Diego Mayor Kevin Faulconer’s office, read a proclamation in which April 20, 2017 was declared Workshops for Warriors’ Day in the City of San Diego.

This was followed by a short speech by alumnus Scott Leoncini, who had been a Marine. He said, “When I got out I didn’t know what I wanted to do. I met my amazing wife Michelle… [who] told me that I should go to school. Determined not to lose her, I did just that.” He worked in gun shops while going to college and finished college with a bachelor’s degree in criminal justice.

He said, “I went on a ride along one night with a local police department and decided that I needed to become a police officer…. I applied to almost all the agencies near my home, but only to end up with a stack of denial letters…I hit a huge wall, I was depressed, looking for any better paying job as I was making 10/hr as a security officer. ”

Then, he heard that a Marine friend of his was killed in a helicopter crash in Florida after just coming back from receiving the Silver Star for his actions in Afghanistan. Scott said, “It took me 6 years of struggle and Andy dying to realize that I needed to change my path, I needed to identify with something else…”

A few days later, he reconnected with some Marine friends, and one of them, Josh Garcia, “was enrolled at Workshops for Warriors at the time, and he told me about how Workshops helped him get into a welding career. Josh told me that they had a Machining program too. The only thing knew about machining is that it was the process used to make guns. I decided that’s what I would do because honestly, I didn’t know what else to do, this was my last effort. Not sure how I would end up, I took a leap of faith.”

Scott went to school in the day and worked nights at a local gun store as he had to work to support his family. He said, “We had a small class of about 10 students, a few of us were vets, and the rest were active duty. I loved working with vets and active duty marines again… All the guys in class had somehow found their way to Workshops… we all were struggling with transition but had the same goal…create a new identity…”

He graduated in spring 2015 with eight certifications in Mill, Lathe, Solidworks, and Mastercam and was offered a job as a Workshops for Warriors Teaching Assistant and be a part of the train-the-trainer program.

Scott said, “I found that I loved teaching and helping students get through the program…I love to come up with new ways of teaching material, and motivating students to push through when it gets hard. I am grateful for the Train-the-trainer program, and opportunity to help students. I am thankful to Hernan and Rachel for helping me discover my passion. To further my abilities, and to ensure that Workshops continues to be the greatest Advanced Manufacturing school in America, I recently enrolled at Point Loma Nazarene University School of Education where I am earning a Master’s in Education Teaching and Learning which will allow me to grow even more within Workshops for Warriors. The train-the-trainer program has given me a new path and allowed me to connect with the veteran community. I am helping other veterans not go through what I did when I got out of the military.”

After this inspiring testimonial, the American Bombshells performed while guests were invited to view and bid on the many silent auction items on display.

Afterward, Special Guest Speaker Donald “Doc” Ballard, Metal of Honor Recipient, gave his remarks. After a brief description of how he earned the Medal of Honor during the Korean War, I took note of the fact that he said, “Too many times, we preach to the choir of those who have served in the military and already have an appreciation for what veterans have done to serve their country. We are missing the mark; only 1% has served our country…The military is a family-owned business that we hand down from generation to generation. Not everyone can serve in the military, but we do have an obligation to this country to thank veterans for the freedom they fought for…We thank a teacher for our ability to read, but we can thank a veteran that we can read and write in English. We can thank veterans by supporting Workshops for Warriors so they can expand to other states. Everyone can serve the military by taking care of the people who are doing the job they can do or won’t do for whatever reason…”

The event closed with more entertainment from the American Bombshells while the guests whose bids won were notified and presented with their auction item.

During dinner, I asked the man sitting next to me why he supported WFW. Doug Davis, General Manager at Kearny Mesa Ford & KIA, said, “Workshops For Warriors is simply an amazing program that is helping Veterans make a living for the rest of their lives. All of us know when we have a skill in the work place, our individual self-esteem improves greatly, and we can go home to our families with a sense of accomplishment. Workshops teaches the manufacturing trade to our Veterans, and when they graduate with a welding or machinist certification, a job is waiting for them 100% of the time! That’s exactly what Workshops for Warriors does for our Veterans. I am lucky enough to support Workshops for Warriors through three channels: personally, my dealership, Kearny Pearson Ford & KIA, and finally through the Ford Motor Company as Chairman of the San Diego Ford Dealers Ad Association Board in selecting recipients of charitable donations.”

Whether or not you have served in a branch of the military, you can help change the life of veterans and Wounded Warriors by support their training in manufacturing skills by donating to the Workshops for Warriors Capital Campaign.

Tags: manufactring skills, skills gap, training, Workshops for Warriors
Posted in Manufacturing, Training, Workforce Development | No Comments »

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